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1.1 INTRODUCTION
Economic decisions in every society must be based upon the information
available at the time the decision is made. For example, the decision of a bank to make
a loan to a business is based upon previous financial relationships with that business,
the financial condition of the company as reflected by its financial statements and
other factors.
If decisions are to be consistent with the intention of the decision makers, the
information used in the decision process must be reliable. Unreliable information can
cause inefficient use of resources to the detriment of the society and to the decision
makers themselves. In the lending decision example, assume that the barfly makes the
loan on the basis of misleading financial statements and the borrower Company is
ultimately unable to repay. As a result the bank has lost both the principal and the
interest. In addition, another company that could have used the funds effectively was
deprived of the money.
As society become more complex, there is an increased likelihood that unreliable
information will be provided to decision makers. There are several reasons for this:
remoteness of information, voluminous data and the existence of complex exchange
transactions
As a means of overcoming the problem of unreliable information, the decisionmaker must develop a method of assuring him that the information is sufficiently
reliable for these decisions. In doing this he must weigh the cost of obtaining more
reliable information against the expected benefits.
A common way to obtain such reliable information is to have some type of
verification (audit) performed by independent persons. The audited information is
then used in the decision making process on the assumption that it is reasonably
complete, accurate and unbiased.
6. Tax Payments
Auditing is useful for business, tax authority accept audited accounts for
assessment of taxes. There is no further inquiry or investigation from department.
The audited accounts lessen the worries of business people.
For Owners
7. Efficiency Improves
Auditing is beneficial for business. The auditing determines the efficiency of
employees. The training and qualifies management is an asset for any business.
Such management can play dynamic role in framing and implementing the
policies.
8. Dispute is Settled
Auditing is essential for business. The audited accounts are helpful to settle the
disputes. The audited accounts become the basis of making decisions. The dispute
may relate to infringement of patents or trademarks.
9. Planning Becomes Possible
Auditing is helpful for business. The audits accounts present true and fair view of
business activities. The facts and figures can be used to prepare budge and
estimates for the next years. The projected cash receipts and payments, income
statement and balance sheet can be prepared.
10. Improvement of Internal Control
Auditing is helpful for business. The auditor can point out the weakness of internal
control system. The business management can take steps to remove these
weaknesses. The effective control systems are essential for large-scale business
enterprises.
11. Fluctuation in Profits
Auditing is helpful for business. The auditor can make the detailed study to find of
fluctuation in profits. There are various reasons for changes in profits. The auditor
can determine the true cause of such changes.
right of beneficiaries. There is a moral check on the trustee to follow the by laws
of trust.
C. Other Advantages.
view
1 Detect on of errors and 1 . Protects interest
frauds
2 Loan from banks
2. Moral check
2. Usting of shares
3 Builds reputation
3. Proper valuation of
3. Settlements of claims
investments
4 Proper valuation of assets
4 Good security
4 Evidence in court
5. Government acceptance
5. Settlement of accounts
6. Update accounts
5. FaciStates calculation of
Purchase. Consternation.
Suggestions
for
7 Facilitates taxation
improvement
8. Useful for agency
1. Audited accounts are readily accepted by Government authorities like Tax authorities
and Central banks.
2. By auditing the accounts Errors and frauds can be detected and rectified in time.
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3. Audited accounts carry greater authority than the accounts which have not been
audited.
4. For accessing finance from financial institutions like Banks, previous years audited
accounts are evaluated for determining repayment capability.
5. Regular audit of account create fear among the employees in the accounts department
and exercise a great moral influence on clients staff thereby restraining them from
commit frauds and errors.
6. Audited accounts facilitate settlement of claims on the retirement/death of a partner.
7. In the event of loss of property by fire or on happening of the event insured against,
Audited accounts help in the early settlement of claims from the insurance company.
8. In case of Public Company where ownership is separated from management, auditing
of accounts reassure the shareholders that accounts have been properly maintained,
funds are utilized for the right purpose and the management have not taken any undue
advantage of their position.
9. To determine the value of the business in the event of purchase or sales of the
business, audited account will be the treated as the base for the evaluation.
10. The audit of accounts by a qualified auditor also help the management to understand
the financial position of the business and also it will help the management to take
decision on various matters like report in internal control system of the organization
or setting up of an internal audit department etc.
11. If the accounts have been audited by an independent person, disputes between the
management and labor unions on payment of bonus and higher wages can be settled
amicably.
12. In the event of admission of a new partner, audited accounts will facilitate the
formation of terms and conditions for joining the new partner. Last 3 years audited
accounts will give a general idea about the growth and financial position of the
business to the new partner.
2.3 DISADVANTAGES OF AUDIT
It is true that auditing as many advantages, but it as some limitations as such
1. Non-detection of errors/frauds: - Auditor may not be able to detect certain frauds
which are committed with malafide intentions.
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3. Not easy to detect some frauds Its not easy for an auditor to detect the deeply laid
frauds which involves acts designed to conceal them such as forgery, false
explanation, and not recording transaction and so on.
4. Audit cannot assure about profitability or efficiency of management Even
though the accounts are audited it doesnt that the user can take granted the future
profitability or prospects of concern as audit dont comment on efficiency of the
management.
5. Rely on experts The auditor has to rely on experts like lawyers, engineers, valuers
etc. for estimation of contingent liability and valuation of fixed assets.
Where such amount is not ascertainable, wholly or in part, the fact should be
indicated. If a change is made in the accounting policies which has no material
effect on the financial statements for the current period but which is
reasonably expected to have a material effect in later periods, the fact of such
change should be appropriately disclosed in the period in which the change is
adopted.
Disclosure of accounting policies or of changes therein cannot remedy a wrong
or inappropriate treatment of the item in the accounts.
Main Principles
All significant accounting policies adopted in the preparation and presentation
of financial statements should be disclosed.
The disclosure of the significant accounting policies as such should form part
of the financial statements and the significant accounting policies should
normally be disclosed in one place.
Any change in the accounting policies which has a material effecting the
current period or which is reasonably expected to have a material effect in later
periods should be disclosed. In the case of a change in accounting policies
which has a material effect in the current period, the amount by which any
item in the financial statements is affected by such change should also be
disclosed to the extent ascertainable. Where such amount is not ascertainable,
wholly or in part, the fact should be indicated.
If the fundamental accounting assumptions, viz. Going Concern, Consistency
and Accrual are followed in financial statements, specific disclosure is not
required. If a fundamental accounting assumption is not followed, the fact
should be disclosed.
3.3 MEANING AND DEFINE OF AUDIT REPORT AND AUDIT
CERTIFICATE
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Audit Report
An auditor, under Section 227 (2) of the Companies Act, 1956, is required to make a
report to the shareholders of the company whether the books of accounts examined by
him exhibit true and fair view of the state of affairs of the business.
The auditor submits his report to his client giving clear and concise information of the
result of audit performed by him. The fact or information contained in the auditor's
report is not available from any other source.
The statutory auditor of a company has to express his professional opinion about the
truth and fairness of the state of affairs of the company as shown by the Balance Sheet
and of the profit or loss as shown by the Profit and Loss Account in addition to other
information in his report.
Audit Certificate - Definition
The general purpose of an audit certificate is to give to the Commission reasonable
assurance that eligible costs (and, if relevant, the receipts) charged under the project
are calculated and claimed by the contractors in accordance with the relevant legal and
financial provisions of the FP6 legal texts, including contractual provisions.
When an auditor certifies a financial statement, it implies that the contents of the
statement are reliable as the auditor has vouched for the exactness of the data. The
term certificate is, therefore, used to mean confirmation of the truth and correctness
of something after a verification of certain exact facts. An auditor may therefore
certify the circulating figures of a newspaper or the value of imports and exports of a
company.
The term certificate should not be confused with the term report'. While a certificate
affirms the truth and correctness of a fact, figure or a statement, a report is generally a
statement of facts or an expression of opinion regarding the truth and fairness of the
facts, figures and statements.
Difference between Audit Report & Audit Certificate
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3. Adverse Opinion
The worst type of financial report that can be issued to a business is an adverse
opinion. This indicates that the firms financial records do not conform to GAAP. In
addition, the financial records provided by the business have been grossly
misrepresented. Although this may occur by error, it is often an indication of fraud.
When this type of report is issued, a company must correct its financial statement and
have it re-audited, as investors, lenders and other requesting parties will generally not
accept it.
4. Disclaimer of Opinion
On some occasions, an auditor is unable to complete an accurate audit report. This
may occur for a variety of reasons, such as an absence of appropriate financial
records. When this happens, the auditor issues a disclaimer of opinion, stating that an
opinion of the firms financial status could not be determined.
3.5 ESSENTIALS OF GOOD AUDIT REPORT
The essentials of good audit report are as follows:
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1. Title
An auditor report must have appropriate title, such as Auditors Report. It is helpful
for the reader to identify the auditors report. It is easy to distinguish it from other
reports. The management can issue any report about the business performance. The
title o the report is essential.
2. Addressee
The addressee may be shareholder or board of director of a company. The auditor can
audit financial statements of any business unit as per agreement. The report should be
appropriately addressed as required by engagement letter and legal requirements. The
report is usually addresses to the shareholders or the board of directors.
3. Identification
The audit report should identify the financial statement that have audited. The
financial statement may include trading profit and loss accounts, balance sheet and
statement of changes in financial position and sources and application of frauds
statement. The report should include the name of the entity. Moreover the data and
period covered by the financial statement are also stated in it.
4. Reference to Auditing Standards
The audit report should indicate the auditing standard or practice followed in
conducting the audit. The international auditing guidelines need assurance that the
audit has been conducted as per set standards.
5. Opinion
The auditors report should clearly state the auditors opinion on the presentation in
the financial statement of the entitys financial position and the result of its operations.
The statement give a true and fair view is an auditors opinion. This opinion is usually
based on national standard or international accounting standards.
6. Signature
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The audit report should be signed in the name of the audit firm, the personal name of
the auditor or both as appropriate.
7. Auditors Address
The address of auditor is stated in the audit report. The name of city is stated in the
report for information of the readers.
8. Date of Report
The report should be dated. It informs the reader that the auditor considered the effect
on the financial statements and in his report of events or transactions about which he
become aware the occurred up to that date.
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Y/N
AS 2 Valuation of Inventories
Y
23
AS 5 Net Profit or Loss for the Period, Prior Period Items and Changes in
Accounting Policies
AS 6 Depreciation Accounting
AS 9 Revenue Recognition
AS 15 Employee Benefits
AS 16 Borrowing Costs
AS 26 Intangible Assets
Inventories are valued at lower of cost or net realisable value. Specific identification
method is required when goods are not ordinarily interchangeable.
AS-4 CONTINGENCIES AND EVENTS OCCURRING AFTER THE
BALANCE SHEET DATE
The amount of a contingent loss should be provided for by a charge in the statement of
profit and loss if it is probable that future events will confirm that, after taking into
account any related probable recovery, an asset has been impaired or a liability has
been incurred as at the balance sheet date, and a reasonable estimate of the amount of
the resulting loss can be made.
Assets and liabilities should be adjusted for events occurring after the balance sheet
date that provide additional evidence to assist the estimation of amounts relating to
conditions existing at the balance sheet date or that indicate that the fundamental
accounting assumption of going concern (i.e., the continuance of existence or
substratum of the enterprise) is not appropriate.
AS-6 DEPRECIATION ACCOUNTING
Allocate depreciable amount of a depreciable assets on systematic basis to each
accounting year over useful life of asset, useful life may be reviewed periodically.
Basis must be consistently followed and disclosed. Any change to be quantified and
disclosed.
Rates of depreciation should be disclosed.
A change in method followed be made only if required by the statute, compliance to
Accounting Standard, appropriate preparation or presentation of the financial
statement.
In cases of extension, revaluation or exchange fluctuation, depreciation to be provided
on adjusted figure prospectively over the residual useful life of the asset.
AS-10 ACCOUNTING FOR FIXED ASSETS
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The cost of a fixed asset should comprise its purchase price and any
attributable cost of bringing the asset to its working condition for its intended
use.
Self-constructed asset shall be accounted at cost.
In case of exchange of asset, fair value of asset acquired or the net book value of asset
given up whichever is more clearly evident shall be considered.
Revaluation is permitted provided it is done for the entire class of assets. The basis of
revaluation should be disclosed.
Increase in value on revaluation shall be credited to Revaluation Reserve while the
decrease should be charged to Profit and Loss Account.
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U31400MH1987PTC042128
Name
RoC
RoC-Mumbai
Registration Number
42128
Company Category
Class of Company
Private Company
500,000
451,200
Date of Incorporation
07 January 1987
Address 1
Address 2
City
PANVEL
State
Maharashtra
Country
INDIA
Pin
410206
Unlisted
Active
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with effective communication skills with great presentation skills. He has the ability to
convert adverse business environment to a favorable business affair.
Mr. Vinay Dattatraya Bhave designated as (Head Sales) aged 49 years,
residing at Flat 201, Kanak Residency, Plot No. 54, MCHS, Near Purohit Hospital,
Old Panvel, Dist. Raigad, Maharashtra-410206. He is a BTech.(Elec.) and holds
Diploma in Electrical Engineering from C.W.I.T., Pune . He is a qualified Engineer
with more than 25 years of qualitative experience in industries like Orkay Polyester,
Hikal etc. Expert at planning and effecting preventive maintenance schedules of
various machineries to increase machine up time and equipment reliability. He is
related to various Social service organizations and is a Founder committee member of
Friends of children organization, a NGO working for poor students. A Member of
Managing Committee of Pen taluka Maternity & Children Welfare Center, a
Charitable Hospital providing Medical Assistance to Poor & Needy people. He is one
of the Founder Managing committee Member of Sobatee a NGO working for
Betterment, Awareness, Education, Environment, Medical Assistance etc for more
than 6 years. He is highly influential with regards to his contacts relating social
welfare cause.
Mr. Vinit Vinayak Joshi designated as (Head - Admin & Logistic) aged 33
years is a resident of At & Post Palaspe, Tal. Panvel, Dist. Raigad Maharashtra410206. He holds a Master of Commerce degree and is Finance Management
graduate. He is a well known academician with more than 10 years of qualitative
experience of in guiding and training finance & accounts students. An expert team
builder and player, has an experience in different areas such as Accounts,
Administration and Customer relations. He is a visiting faculty for MBA at various
colleges such as, Mumbai School of Business, S. P. More College, Pillais College etc.
4.4 KEY DELIVERABLES BY THE COMPANY
Overseeing breakdown and preventive maintenance of Spinning, Polyester,
Test Rising, Knitting, Utility Plants and Diesel Generating Sets.
Executing Fault fining and rectification of faults in control circuits, power
circuits or in any type of electrical breakdown in various types of equipments,
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Note No,
as at 31 -Mar-2014
as at 31-Mar-2013
147311162
1090900.23
Shareholders' Funds
(a) Share Capital
451200.00
451200.00
1021915.62
639700.28
138343100
138343100
1399435.00
1389435.00
1767787.96
2002349.33
Non-Current Liabilities
(a) Long-Term Borrowings
Current Liabilities
(a) Short Term Borrowings
728830.32
344654.32
374422.72
1121234.72
660689.45
339997.82
3795.47
196462.47
4630338.53
4482684.61
Total
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II. ASSETS
1
Non-Current Assets
647022.00
69325100
322970.00
369203.00
310936.00
353709.00
12034.00
15494.00
324052.00
324052.00
3983316.53
3783429.61
10
Current Assets
(a) Current Investments
11
175393.04
175393.04
(b) Inventories
12
275980.00
235098.00
13
3240920.47
3030252.50
14
220627 07
278290.07
15
40080.00
40080.00
16
30316.00
30316.00
Total
463033813
TIRTHAROOP ELECTRICALS PVT. LTD.
4482684.61
Note
No.
1-Apr-2013 to
31-Mar-2014
1-Apr-2012 to
31 -Mar-2013
17
4934998.49
-
10242318.52
32018.00
4934998.49
10274336.52
I
II
III
IV
EXPENSES
Purchases of Stock-in-Trade
18
2331601.74
6473439.95
Changes in Inventories
19
-40832.000
30362.00
20
345348.00
231729.30
Finance Costs
21
40010.00
69750.00
46233.00
43053.32
Other Expenses
22
1980472.41
3066345.06
TOTAL EXPENSES
4602733.15
9919299.63
332215.34
355036.89
V
VI
30
332215.34
-
355036.89
-
IX
X
332215.34
355036.89
Current Tax
Deferred Tax
332215.34
355036.89
332215.34
355036.89
-Basic
-Diluted
XI
XV
as at 31 -Mar-2014
as at 31 -Mar-2013
31
595076.00
2633349.50
595076.00
2633349.50
2645344.47
396903.00
2&45S44.47
336903.00
Total
3240920.47
3030252.50
date
Debtor ledger: -
These ledger accounts of customers are opened to whom trader has sold the goods, so
its other name is also sale account ledger. Because all credit sale's amount can be
checked from the amount due from debtors in this ledger. It is also one place where
we can find each debtor's closing balance.
The objectives of studying audit of debtors ledger is 1.
2.
3.
To confirm that company has prepared debtors ledger without any errors and
as at 31 -Mar-2014
as at 31 -Mar-2013
300906.00
156591.00
44442.00
75136.30
Total
345348.00
231729.30
32
It is broad in its applicability as it covers all short-term and long term employee
benefits. For example, annual paid leave (though not en cashable), long-term service
rewards, subsidised goods or services, etc. are also covered.
f. Since the Central Government has not issued any notification as to the rate at which
the cess is to be paid under section 441A of the Companies Act, 1956 nor has it issued
any Rules under the said section, prescribing the manner in which such cess is to be
paid, no cess is due and payable by the Company.
For XXX
CHARTERED ACCOUNTANTS
Place : Mumbai
MR. A
Date : 31/08/2014
(Proprietor)
Membership No. 132564
CONCLUSION
which audit of company should be done. Form auditing point of view, there is proper
follow up of work done in every organization there no misconduct of transactions is
taken places for that purpose the auditing is very important aspect in todays scenario
form company and point of view.
www.slideshare.net/company-audit
www.moneycontrol.com
www.profit.ndtv.com
www.icao.int
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